MALTA DOUBLE TAX TREATIES

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L.N. 104 of 1994

INCOME TAX ACT`(CAP. 123)

Double Taxation Relief (Taxes on Income)(People’s Republic of China) Order, 1994

IN exercise of the powers conferred by section 80 of the Income TaxAct, the Minister of Finance has made the following Order:-

1. This Order may be cited as the Double Taxation Relief (Taxes onIncome) (People’s Republic of China) Order, 1994.

2. It is hereby declared:-

(a) that the arrangements specified in the Agreement set outin the Schedule to this Order have been made with the Government ofthe People’s Republic of China with a view to affording relief fromdouble taxation in relation to the following taxes imposed by the laws ofthe People’s Republic of China.

Citation.

Arrangementsto haveeffect.

(i) the individual income tax;

(ii) the income tax for enterprises with foreigninvestment and foreign enterprises;

(iii) the local income tax;

(b) that it is expedient that those arrangements should haveeffect.

SCHEDULE

AGREEMENTBETWEEN THE GOVERNMENT OF MALTA

AND THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINAFOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCALEVASION WITH RESPECT TO TAXES ON INCOME

The Government of Malta and the Government of the People’s Republic of China,desiring to conclude an Agreement for the avoidance of double taxation and the prevention offiscal evasion with respect to taxes on income, have agreed as follows:

ARTICLE 1

Personal Scope

This Agreement shall apply to persons who are resident of one or both of theContracting States.

ARTICLE 2

Taxes Covered

1. This Agreement shall apply to taxes on income imposed on behalf of aContracting State or of its local authorities, irrespective of the manner in which they arelevied.

2. There shall be regarded as taxes on income all taxes imposed on total income,or on elements of income, including taxes on gains from the alienation of movable orimmovable property, as well as taxes on capital appreciation.

3. The existing taxes to which the Agreement shall apply are:

(a) in the People’s Republic of China:

(i) the individual income tax;

(ii) the income tax for enterprises with foreign investment andforeign enterprises;

(iii) the local income tax;(hereinafter referred to as “Chinese tax”);

(b) in Malta:the income tax;(hereinafter referred to as “Malta tax”).

4. This Agreement shall also apply to any identical or substantially similar taxeswhich are imposed after the date of signature of this Agreement in addition to, or in place of,the existing taxes referred to in paragraph 3. The competent authorities of the ContractingStates shall notify each other of any significant changes which have been made in theirrespective taxation laws within a reasonable period of time after such changes.

ARTICLE 3

General Definitions

1. For the purposes of this Agreement, unless the context otherwise requires:

(a) the term “China” means the People’s Republic of China; when used in ageographical sense, means all the territory of the People’s Republic of China, includingits territorial sea, in which the Chinese laws relating to taxation apply, and any areabeyond its territorial sea, within which the People’s Republic of China has sovereignrights of exploration for and exploitation of resources of the seabed and its sub-soiland superadjacent water resources in accordance with international law;

(b) the term “Malta”, when used in a geographical sense, means the Islandof Malta, the Island of Gozo and the other Islands of the Maltese archipelago includingthe territorial waters thereof, and any area outside the territorial sea of Malta which, inaccordance with international law, has been or may hereafter be designated, under thelaw of Malta concerning the Continental Shelf, as an area within which the rights ofMalta with respect to the seabed and subsoil and their natural resources may beexercised;

(c) the terms “a Contracting State” and “the other Contracting State” meanChina or Malta as the context requires;

(d) the term “person” includes an individual, a company and any otherbody of persons;

(e) the term “company” means any body corporate or any entity which istreated as a body corporate for tax purposes;

(f) the terms “enterprise of a Contracting State” and “enterprise of theother Contracting State” mean, respectively, an enterprise carried on by a resident of aContracting State and an enterprise carried on by a resident of the other ContractingState;

(g) the term “nationals” means:

(i) in respect of China, all individuals possessing the nationality ofChina and all juridicial persons created or organised under the laws of China aswell as any organisations without juridical personality treated for tax purposesas juridical persons created or organised under the laws of China;

(ii) in respect of Malta, any citizen of Malta and any legal person,partnership or association deriving its status as such from the law in force inMalta;

(h) the term “international traffic” means any transport by a ship or aircraftoperated by an enterprise which has its place of head office (i.e. effective management)in a Contracting State, except when the ship or aircraft is operated solely betweenplaces in the other Contracting State;

(i) the term “competent authority” means:

(i) in the case of China, the State Tax Bureau or its authorizedrepresentative; and

(ii) in the case of Malta, the Minister responsible for finance or hisauthorized representative.

2. As regards the application of this Agreement by a Contracting State, any termnot defined therein shall, unless the context otherwise requires, have the meaning which it hasunder the laws of that Contracting State concerning the taxes to which this Agreementapplies.

ARTICLE 4

Resident

1. For the purposes of this Agreement, the term “resident of a Contracting State”means any person who, under the laws of that Contracting State, is liable to tax therein byreason of his domicile, residence, place of head office (i.e. effective management) or any othercriterion of a similar nature.

2. Where by reason of the provisions of paragraph 1 an individual is a resident ofboth Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident solely of the Contracting State inwhich he has a permanent home available to him; if he has a permanent home availableto him in both Contracting States, he shall be deemed to be a resident solely of theContracting State with which his personal and economic relations are closer (centre ofvital interests);

(b) if the State in which he has his centre of vital interests cannot bedetermined, or if he has no permanent home available to him in either ContractingState, he shall be deemed to be a resident solely of the Contracting State in which hehas an habitual abode;

(c) if he has an habitual abode in both Contracting States or in neither ofthem, he shall be deemed to be a resident solely of the Contracting State of which he isa national;

(d) if he is a national of both Contracting States or of neither of them, thecompetent authorities of the Contracting States shall settle the question by mutualagreement.

3. Where by reason of the provisions of paragraph 1 a person other than anindividual is a resident of both Contracting States, then it shall be deemed to be a residentsolely of the Contracting State in which its place of head office (i.e. effective management) issituated.

ARTICLE 5

Permanent Establishment

1. For the purposes of this Agreement, the term “permanent establishment”means a fixed place of business through which the business of an enterprise is wholly or partlycarried on.

2. The term “permanent establishment” includes especially:

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) a mine, an oil or gas well, an offshore drilling site, a quarry or any otherplace of extraction of natural resources;

(g) a building site, a construction, assembly or installation project orsupervisory activities in connection therewith, where such site, project or activitiescontinue for a period of more than 8 months;

(h) the furnishing of services, including consultancy services, by anenterprise of a contracting State through employees or other engaged personnel in theother Contracting State, provided that such activities continue for the same project ora connected project for a period or periods aggregating more than 8 months.

3. Notwithstanding the provisions of paragraphs 1 and 2, the term “permanentestablishment” shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage, display or deliveryof goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to theenterprise solely for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to theenterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose ofpurchasing goods or merchandise, or of collecting information, for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose ofcarrying on, for the enterprise, any other activity of a preparatory or auxiliarycharacter;

(f) the maintenance of a fixed place of business solely for any combinationof activities mentioned in sub-paragraphs (a) to (e), provided that the overall activityof the fixed place of business resulting from this combination is of a preparatory orauxiliary character.

4. A person engaged in a Contracting State in activities which are complimentaryor auxiliary to activities in connection with either the exploration of the seabed and its subsoilor the exploitation of natural resources situated there is deemed to exercise such activitiesthrough a permanent establishment in that State.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - otherthan an agent of an independent status to whom the provisions of paragraph 6 apply - is actingin a Contracting State on behalf of an enterprise of the other contracting State, has andhabitually exercised an authority to conclude contracts in the name of the enterprise, thatenterprise shall be deemed to have a permanent establishment in the first-mentionedContracting State in respect of any activities which that person undertakes for the enterprise,unless the activities of such person are limited to those mentioned in paragraph 3 which, ifexercised through a fixed place of business, would not make this fixed place of business apermanent establishment under the provisions of that paragraph.

6. An enterprise of a Contracting State shall not be deemed to have a permanentestablishment in the other Contracting State merely because it carries on business in that otherContracting State through a broker, general commission agent or any other agent of anindependent status, provided that such persons are acting in the ordinary course of theirbusiness. However, when the activities of such an agent are devoted wholly or almost whollyon behalf of that enterprise, he shall not be considered an agent of an independent statuswithin the meaning of this paragraph if the transactions between the agent and the enterprisewere not made under arm’s length conditions.

7. The fact that a company which is a resident of a Contracting State controls oris controlled by a company which is a resident of the other Contracting State, or which carrieson business in that other State (whether through a permanent establishment or otherwise),shall not of itself constitute either company a permanent establishment of the other.

ARTICLE 6

Income from Immovable Property

1. Income derived by a resident of a Contracting State from immovable propertysituated in the other Contracting State may be taxed in that other Contracting State.

2. The term “immovable property” shall have the meaning which it has under thelaw of the Contracting State in which the property in question is situated. The term shall inany case include property accessory to immovable property, livestock and equipment used inagriculture and forestry, rights to which the provisions of general law respecting landedproperty apply, usufruct of immovable property and rights to variable or fixed payments asconsideration for the working of, or the right to work or to explore for, mineral deposits,sources and other natural resources. Ships and aircraft shall not be regarded as immovableproperty.

3. The provisions of paragraph 1 shall apply to income derived from the directuse, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income fromimmovable property of an enterprise and to income from immovable property used for theperformance of independent personal services.

ARTICLE 7

Business Profits

1. The profits of an enterprise of a Contracting State shall be taxable only in thatContracting State unless the enterprise carries on business in the other Contracting Statethrough a permanent establishment situated therein. If the enterprises carries on business asaforesaid, the profits of the enterprise may be taxed in the other Contracting State, but only somuch of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a ContractingState carries on business in the other Contracting State through a permanent establishmentsituated therein, there shall in each Contracting State be attributed to that permanentestablishment the profits which it might be expected to make if it were a distinct and separateenterprise engaged in the same or similar activities under the same or similar conditions anddealing wholly independently with the enterprise of which it is a permanent establishment orwith other enterprises with which it deals.

3. In determining the profits of a permanent establishment, there shall be allowedas deductions expenses which are incurred for the purposes of the business of the permanentestablishment, including executive and general administrative expenses so incurred, whetherin the State in which the permanent establishment is situated or elsewhere.

4. Nothing in this Article shall affect the application of any law of a ContractingState relating to the determination of the profits to be attributed to a permanent establishmentby the method of exercise of discretion or the making of an estimate in cases where theinformation available to the competent authority of that State is inadequate to determine thoseprofits, provided that that law shall be applied, so far as the information available to thecompetent authority permits, consistently with the principles of this Article.

5. No profits shall be attributed to a permanent establishment by reason of themere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of paragraphs 1 to 5, the profits to be attributed to thepermanent establishment shall be determined by the same method year by year unless there isgood and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in otherArticles of this Agreement, then the provisions of those Articles shall not be affected by theprovisions of this Article.

ARTICLE 8

International Traffic

1. Profits from the operation of ships or aircraft in international traffic shall betaxable only in the Contracting State in which the place of head office (i.e. effectivemanagement) of the enterprise is situated.

2. If the place of head office (i.e. effective management) of a shipping enterpriseis aboard a ship, then it shall be deemed to be situated in the Contracting State in which thehome harbour of the ship is situated or if there is no such home harbour, in the ContractingState of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participationin a pool, a joint business or an international operating agency.

ARTICLE 9

Associated Enterprises

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly inthe management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management,control or capital of an enterprise of a Contracting State and an enterprise of the otherContracting State,

and in either case conditions are made or imposed between the two enterprises in theircommercial or financial relations which differ from those which would be made betweenindependent enterprises, then any profits which would, but for those conditions, have accruedto one of the enterprises, but, by reason of those conditions, have not so accrued, may beincluded in the profits of that enterprise and taxed accordingly.

2. Nothing in this Article shall affect the application of any law of a ContractingState relating to the determination of the profits to be attributed to an enterprise by themethod of exercise of discretion or the making of an estimate in cases where the informationavailable to the competent authority of that State is inadequate to determine those profits,provided that that law shall be applied, so far as the information available to the competentauthority permits, consistently with the principles of this Article.

3. Where a Contracting State includes in the profits of an enterprise of thatContracting State, and taxes accordingly, profits on which an enterprise of the otherContracting State has been charged to tax in that other Contracting State, and the profits soincluded are profits which would have accrued to the enterprise of the first mentioned State ifthe conditions made between the two enterprises had been those which would have been madebetween independent enterprises, then that other Contracting State shall make an appropriateadjustment to the amount of the tax charged therein on those profits. In determining suchadjustment, due regard shall be had to the other provisions of this Agreement and thecompetent authorities of the Contracting States shall, if necessary, consult each other.

ARTICLE 10

Dividends

1. Dividends paid by a company which is a resident of a Contracting State to aresident of the other Contracting State may be taxed in that other Contracting State.

2. However, such dividends may also be taxed in the Contracting State of whichthe company paying the dividends is a resident and according to the laws of that ContractingState, but:

(a) where the dividends are paid by a company which is a resident of Chinato a resident of Malta who is the beneficial owner thereof, the Chinese tax so chargedshall not exceed 10 per cent of the gross amount of the dividends;

(b) where the dividends are paid by a company which is a resident of Maltato a resident of China who is the beneficial owner thereof, the Malta tax on the grossamount of the dividends shall not exceed that chargeable on the profits out of whichthe dividends are paid.

This paragraph shall not affect the taxation of the company in respect of the profits outof which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares, orother rights, not being debt-claims, participating in profits, as well as income from othercorporate rights which is subjected to the same taxation treatment as income from shares bythe laws of the State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner ofthe dividends, being a resident of a Contracting State, carries on business in the otherContracting State of which the company paying the dividends is a resident, through apermanent establishment situated therein, or performs in that other Contracting Stateindependent personal services from a fixed base situated therein, and the holding in respect ofwhich the dividends are paid is effectively connected with such permanent establishment orfixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shallapply.

5. Where a company which is a resident of a contracting State derives profits orincome from the other Contracting State, that other Contracting State may not impose any taxon the dividends paid by the company, except insofar as such dividends are paid to a residentof that other Contracting State or insofar as the holding in respect of which the dividends arepaid is effectively connected with a permanent establishment or a fixed base situated in thatother Contracting State, nor subject the company’s undistributed profits to a tax on thecompany’s undistributed profits, even if the dividends paid or the undistributed profits consistwholly or partly of profits or income arising in such other Contracting State.

ARTICLE 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the otherContracting State may be taxed in that other Contracting State.

2. However, such interest may also be taxed in the Contracting State in which itarises and according to the laws of that Contracting State, but if the recipient is the beneficialowner of the interest, the tax so charged shall not exceed 10 per cent of the gross amount ofthe interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a ContractingState shall be exempt from tax in that State if it is derived by the Government of the otherContracting State, a local authority thereof or such institution as may be agreed upon by bothContracting States, provided that such institution is wholly owned or controlled by thatGovernment or local authority.

4. The term “interest” as used in this Article means income from debt-claims ofevery kind, whether or not secured by mortgage and whether or not carrying a right toparticipate in the debtor’s profits, and in particular, income from government securities andincome from bonds or debentures, including premiums and prizes attaching to such securities,bonds or debentures. Penalty charges for late payment shall not be regarded as interest forthe purpose of this Article.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner ofthe interest, being a resident of a Contracting State, carries on business in the otherContracting State in which the interest arises, through a permanent establishment situatedtherein, or performs in that other Contracting State independent personal services from a fixedbase situated therein, and the debt-claim in respect of which the interest is paid is effectivelyconnected with such permanent establishment or fixed base. In such case the provisions ofArticle 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is thatGovernment of the Contracting State, a local authority thereof or a resident of thatContracting State Where, however, the person paying the interest, whether he is a resident ofa Contracting State or not, has in a Contracting State a permanent establishment or fixed basein connection with which the indebtedness on which the interest is paid was incurred, and suchinterest is borne by such permanent establishment or fixed base, then such interest shall bedeemed to arise in the Contracting State in which the permanent establishment or fixed base issituated.

7. Where, by reason of a special relationship between the payer and the beneficialowner or between both of them and some other person, the amount of the interest paid,having regard to the debt-claim for which it is paid, exceeds the amount which would havebeen agreed upon by the payer and the beneficial owner in the absence of such relationship,the provisions of this Article shall apply only to the last-mentioned amount. In such case, theexcess part of the payments shall remain taxable according to the laws of each ContractingState, due regard being had to the other provisions of this Agreement.

ARTICLE 12

Royalties

1. Royalties arising in a Contracting State and paid to a resident of the otherContracting State may be taxed in that other Contracting State.

2. However, such royalties may also be taxed in the Contracting State in whichthey arise, and according to the laws of the Contracting State, but if the recipient is thebeneficial owner of the royalties, the tax so charged shall not exceed 10 per cent of the grossamount of the royalties.

3. The term “royalties’ as used in this Article means payments of any kindreceived as a consideration for the use of, or the right to use, any copyright of literary, artisticor scientific work including cinematographic films and films or tapes for radio or televisionbroadcasting, any patent, know-how, trade mark, design or model, plan, secret formula orprocess, or for the use of, or the right to use, industrial, commercial or scientific equipment,or for information concerning industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner ofthe royalties, being a resident of a Contracting State, carries on business in the otherContracting State in which the royalties arise, through a permanent establishment situatedtherein, or performs in that other Contracting State independent personal services from a fixedbase situated therein, and the right or property in respect of which the royalties are paid iseffectively connected with such permanent establishment or fixed base. In such case theprovisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is theGovernment of that Contracting State, a local authority thereof or a resident of thatContracting State. Where, however, the person paying the royalties, whether he is a residentof a Contracting State or not, has in a Contracting State a permanent establishment or a fixedbase in connection with which the liability to pay the royalties was incurred, and such royaltiesare borne by such permanent establishment or fixed base, then such royalties shall be deemedto arise in the Contracting State in which the permanent establishment or fixed base issituated.

6. Where by reason of a special relationship between the payer and the beneficialowner or between both of them and some other person, the amount of the royalties, havingregard to the use, right or information for which they are paid, exceeds the amount whichwould have been agreed upon by the payer and the beneficial owner in the absence of suchrelationship, the provisions of this Article shall apply only to the last-mentioned amount. Insuch case, the excess part of the payments shall remain taxable according to the laws of eachContracting State, due regard being had to the other provisions of this Agreement.

ARTICLE 13

Alienation of Property

1. Income or gains from the alimentation of immovable property, as defined inArticle 6, may be taxed in the Contracting State in which such property is situated.

2. Income or gains from the alienation of shares of the capital stock of a companythe property of which consists directly or indirectly principally of immovable property situatedin a Contracting State may be taxed in that Contracting State.

3. Income or gains from the alienation of movable property forming part of thebusiness property of a permanent establishment which an enterprise of a Contracting State hasin the other Contracting State or of movable property pertaining to a fixed base available to aresident of a Contracting State in the other Contracting State for the purpose of performingindependent personal services, including such income or gains from the alienation of such apermanent establishment (alone or together with the whole enterprise) or of such fixed base,may be taxed in the other Contracting State.

4. Income or gains from the alienation of ships and aircraft operated ininternational traffic or movable property pertaining to the operation of such means oftransportation shall be taxable only in the Contracting State in which the place of head office(i.e. effective management) of the enterprise is situated.

5. Income or gains from the alienation of shares other than those mentioned inparagraph 2 representing a participation of at least 25 per cent in a company which is aresident of a Contracting State may be taxed in that Contracting State.

6. Income or gains from the alienation of any property other than that referred toin paragraphs 1 to 5, shall be taxable only in the Contracting State of which the alienator is aresident.

ARTICLE 14

Independent Personal Services

1. Income derived by a resident of a Contracting State in respect of professionalservices or other activities of an independent character shall be taxable only in thatContracting State except in one of the following circumstances, when such income may alsobe taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other ContractingState for the purpose of performing his activities; in that case, only so much of theincome as is attributable to that fixed base may be taxed in that other ContractingState; or

(b) if his stay in the other Contracting Satte is for a period or periodsamounting to or exceding in the aggregate 183 days in the calendar year concerned; inthat case, only so much of the income as is derived from his activities performed inthat other Contracting State may be taxed in that other Contracting State; or

(c) if the remuneration for his services in the other Contracting State isderived from residents of that State and exceeds the equivalent of U.S.$ 10, 000during the calendar year, notwithstanding that his stay in that State is for a period orperiods amounting in the aggregate to less than 183 days during that year.

2. The term “professional services” includes especially independent scientific,literary, artistic, educational or teaching activities as well as the independent activities ofphysicians. lawyers, engineers, architects, dentists and accountants.

ARTICLE 15

Dependent Personal Services

1. Subject to the provisions of Article 16, 18, 19, 20 and 21, salaries, wages andother similar remuneration derived by a resident of a Contracting State in respect of anemployment shall be taxable only in that Contracting State unless the employment is exercisedin the other Contracting State. If the employment is so exercised, such remuneration as isderived therefrom may be taxed in that other Contracting State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by aresident of a Contracting State in respect of an employment exercised in the other ContractingState shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other Contracting State for a period orperiods not exceeding in the aggregate 183 days in the calendar year concerned; and

(b) the remuneration is paid by, or on behalf of, an employer who is not aresident of the other Contracting State; and

(c) the remuneration is not borne by a permanent establishment or a fixedbase which the employer has in the other Contracting State.

3. Notwithstanding the provisions of paragraph 1 and 2 of this Article,remuneration derived in respect of an employment aboard a ship or aircraft operated by anenterprise of a Contracting State in international traffic, may be taxed in the Contracting Statein which the place of head office (i.e. effective management) of the enterprise is situated.

ARTICLE 16

Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting Statein his capacity as a member of the board of directors, or other comparable body howeverdescribed, of a company which is a resident of the other Contracting State, may be taxed inthe other Contracting State.

ARTICLE 17

Artistes and Athletes

1. Notwithstanding the provisions of Articles 14 and 15, income derived by aresident of a Contracting State as an entertainer, such as a theatre, motion picture, radio ortelevision artiste, or a musician, or as an athlete, from his personal activities as such exercisedin the other Contracting State, may be taxed in that other Contracting State.

2. Where income in respect of personal activities exercised by an entertainer of anathlete in his capacity as such accrues not to the entertainer or athlete himself but to anotherperson, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed inthe Contracting State in which the activities of the entertainer or athlete are exercised.

3. Notwithstanding the provisions of paragraphs 1 and 2, income derived byentertainers or athletes who are residents of a Contracting State from the activities exercisedin the other contracting State under a plan of cultural exchange between the Governments ofboth Contracting States shall be exempt from tax in that other Contracting State.

ARTICLE 18

Pensions

1. Subject to the provisions of paragraph 2 of Article 19, pensions and othersimilar remuneration paid to a resident of a Contracting State in consideration of pastemployment shall be taxable only in that Contracting State.

2. Notwithstanding the provisions of paragraph 1, pensions and other paymentsmade under the social security legislation of a Contracting State shall be taxable only in thatContracting State.

ARTICLE 19

Government Service

1. (a) Remuneration, other than pension, paid by the Government of aContracting State or a local authority thereof to an individual in respect of servicesrendered to the Government of that Contacting State or a local authority thereof shallbe taxable only in that Contracting State.

(b) However, such remuneration shall be taxable only in the otherContracting State if the services are rendered in that other Contracting State and theindividual is a resident of that other Contracting State who:

(i) is a national of that other Contracting State; or

(ii) did not become a resident of that other Contracting State solelyfor the purpose of rendering the services.

2. (a) Any pension paid by, or out of funds to which contributions are madeby, the Government of a Contracting State or a local authority thereof to an individualin respect of services rendered to the Government of that Contracting State or a localauthority thereof shall be taxable only in that Contracting State.

(b) However, such pension shall be taxable only in the other ContractingState if the individual is a resident of, and a national of, that other Contracting State.

3. The provisions of Articles 15, 16, 17 and 18 shall apply to remuneration andpensions in respect of services rendered in connection with any business carried on by theGovernment of a Contracting State or a local authority thereof.

ARTICLE 20

Teachers and Researchers

1. Remuneration which a professor or teacher who is or was immediately beforevisiting a Contracting State a resident of the other Contracting State and who is present in thefirst-mentioned State for the purpose of carrying out advanced study or research or forteaching at a university, college, school or other educational institution receives for such workshall not be taxed in that State, for a period of two years from the date of his first arrival in thefirst mentioned Contracting State, insofar as such remuneration derives from such advancedstudy, research or teaching.

2. This Article shall not apply to income from research if such research isundertaken primarily for the private benefit of a specific person o persons.

ARTICLE 21

Students and Trainees

A student, business apprentice or trainee who is or was immediately before visiting aContracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training shall be exempt from tax inthat first-mentioned State on the following payments or income received or derived by him forthe purpose of his maintenance, education or training:

(a) payments derived from sources outside that Contracting State for thepurpose of his maintenance, education, study, research or training;

(b) grants, scholarships or awards supplied by the Government, or ascientific, educational, cultural or other tax-exempt organization; and

(c) any remuneration not exceeding an amount equivalent to U.S.$ 3,000in respect of services in the first mentioned Contracting State provided the services areperformed in connection with his study, research or training or are necessary for thepurposes of his maintenance.

ARTICLE 23

Elimination of Double Taxation

1. In China, double taxation shall be eliminated as follows:

(a) Where a resident of China derives income from Malta, the amount oftax on that income payable in Malta in accordance with the provisions of thisAgreement shall be credited against the Chinese tax imposed on that resident. Theamount of the credit, however, shall not exceed the amount of the Chinese tax on theincome computed in accordance with the taxation laws and regulations of China.

(b) Where the income derived from Malta is a dividend paid by a companywhich is a resident of Malta to a company which is a resident of China and whichowns not less than 10 per cent of the shares of the company paying the dividend, thecredit shall take into account the tax paid to Malta by the company paying the dividendin respect of its income.

2. In Malta, double taxation shall be eliminated as follows:

Subject to the provisions of the law of Malta regarding the allowance of a creditagainst Malta tax in respect of foreign tax, where, in accordance with the provisions of thisAgreement, there is included in a Malta assessment income from sources within China, theChinese tax on such income shall be allowed as a credit against the relative Malta tax payablethereon.

3. For the purposes of allowances as a credit, the tax payable in China or Malta,as the context requires, shall be deemed to include the tax which is otherwise payable in aContracting State but has been reduced or waived by that Contracting State under its legalprovisions for tax incentives. In the case of dividends, interest and royalties, any such taxwhich has been exempted or reduced shall be deemed to have been paid at 10 per cent of thegross amount of such dividends, interest and royalties.

ARTICLE 24

Non-Discrimination

1. Nationals of a Contracting State shall not be subjected in the other ContractingState to any taxation or any requirement connected therewith, which is other or moreburdensome than the taxation and connected requirements to which nationals of that otherContracting State in the same circumstances are or may be subjected. The provisions of thisparagraph shall, notwithstanding the provisions of Article 1, also apply to persons who are notresidents of one or both of the Contracting States.

2. The taxation on a permanent establishment which an enterprise of aContracting State has in the other Contracting State shall not be less favourably levied in thatother Contracting State than the taxation levied on enterprises of that other Contracting Statecarrying on the same activities.

3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article11, or paragraph 6 of Article 12 apply, interest, royalties and other disbursements paid by anenterprise of a Contracting State to a resident of the other Contracting State shall, for thepurpose of determining the taxable profits of such enterprise, be deductible under the sameconditions as if they had been paid to a resident of the first-mentioned State.

4. Enterprises of a Contracting State, the capital of which is wholly or partlyowned or controlled, directly or indirectly, by one or more residents of the other ContractingState, shall not be subjected in the first-mentioned State to any taxation or any requirementconnected therewith which is other or more burdensome than the taxation and connected

requirement to which other similar enterprises of the first mentioned State are or may besubjected.

5. Nothing in this Article shall be construed as obliging a Contracting State togrant to individuals who are residents of the other Contracting State any personal allowances,reliefs and reductions for tax purposes on account of civil status, family responsibilities or anyother personal circumstances which it grants to its own residents.

6. The provisions of this Article shall, notwithstanding the provisions of Article 2,apply to taxes of every kind and description.

ARTICLE 25

Mutual Agreement Procedure

1. Where a person considers that the actions of one or both of the ContractingStates result or will result for him in taxation not in accordance with the provisions of thisAgreement, he may, irrespective of the remedies provided by the domestic law of those States,present his case to the competent authority of the Contracting State of which he is a residentor, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of whichhe is a national. The case must be presented within three years from the first notification ofthe action resulting in taxation not in accordance with the provisions of the Agreement.

2. The competent authority shall endeavour, if the objection appears to it to bejustified and if it is not itself able to arrive at a satisfactory solution, to resolve the case bymutual agreement with the competent authority of the other Contracting State, with a view tothe avoidance of taxation which is not in accordance with this Agreement. Any agreementreached shall be implemented notwithstanding any time limits in the domestic law of theContacting States.

3. The competent authorities of the Contracting States shall endeavour to resolveby mutual agreement any difficulties or doubts arising as to the interpretation or application ofthe Agreement. They may also consult together for the elimination of double taxation in casesnot provided for in this Agreement.

4. The competent authorities of the Contracting States may communicate witheach other directly for the purpose of reaching an agreement in the sense of paragraphs 2 and3. When it seems advisable for reaching agreement, representatives of the competentauthorities of the Contracting States may meet together for an oral exchange of opinions.

ARTICLE 26

Exchange of Information

1. The competent authorities of the Contracting States shall exchange suchinformation as is necessary for carrying out the provisions of this Agreement or of thedomestic laws of the Contracting States concerning taxes covered by the Agreement, insofaras the taxation thereunder is not contrary to this Agreement, in particular for the prevention ofevasion of such taxes. The exchange of information is not restricted by Article 1. Anyinformation received by a Contracting State shall be treated as secret in the same manner asinformation obtainable under the domestic laws of that Contracting State and shall bedisclosed only to persons or authorities (including courts and administrative bodies) involvedin the assessment or collection of, the enforcement or prosecution in respect of, or thedetermination of appeals in relation to, the taxes covered by the Agreement. Such persons orauthorities shall use the information only for such purposes. They may disclose theinformation in public court proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph 1 be construed so as to impose ona Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws andadministrative practise of that or of the other Contracting State;

(b) to supply information which is not obtainable under the laws or in thenormal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business,industrial, commercial or professional secret or trade process, or information, thedisclosure of which would be contrary to public policy (ordre public).

ARTICLE 27

Diplomatic Agents and Consular Officers

Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents orconsular officers under the general rules of international law or under the provisions of specialagreements.

ARTICLE 28

Entry into Force

This Agreement shall enter into force on the thirtieth day after the date on whichdiplomatic notes indicating the completion of internal legal procedures necessary in eachContracting State for the entry into force of this Agreement have been exchanged. ThisAgreement shall have effect in respect of income derived during any year beginning on or after

the first day of January of the calendar year next following that in which this agreement entersinto force.

ARTICLE 29

Termination

This Agreement shall remain in force until terminated by a Contracting State. Eitherof the Contracting States may, on or before the thirtieth day of June in any calendar yearbeginning after the expiration of a period of five years from the date of its entry into force,give written notice of termination to the other Contracting State through the diplomaticchannels. In such event this Agreement shall cease to have effect in respect of income derivedduring any year beginning on or after the first day of January of the calendar year nextfollowing that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, being duly authorized thereto by theirrespective Governments, have signed this Agreement.

DONE at Beijing on the second day of February, 1993 in duplicate in the English andChinese languages, both texts being equally authentic.

FOR THE GOVERNMENT OFMALTA

JOHN DALLIMINISTER OF FINANCE

FOR THE GOVERNMENT OF THEPEOPLE’S REPUBLIC OF CHINA

LIU ZHONG LIMINISTER OF FINANCE

PROTOCOL

At the moment of signature of the Agreement between the Government if the People’sRepublic of China and the Government of Malta for the Avoidance of Double Taxation andthe Prevention of Fiscal Evasion with respect to Taxes on Income, both parties have agreedupon the following provisions which will form any integral part of the Agreement:

1. With reference to Article 7, each Contracting State shall tax the profit from thebusiness of insurance in accordance with the provisions of its own law.

2. With reference to Article 8, this Agreement shall not affect the application ofthe provisions of Article 18 in respect of taxation of the Agreement on Maritime Transportsigned in Beijing between the Government of Malta and the Government of the People’sRepublic of China on September 10, 1991.

IN WITNESS whereof the undersigned, being duly authorized thereto by theirrespective Governments, have signed this Protocol.

DONE at Beijing on the second day of February, 1993 in duplicate in the English andChinese languages, both texts being equally authentic.

FOR THE GOVERNMENT OFMALTA

JOHN DALLIMINISTER OF FINANCE

FOR THE GOVERNMENT OF THEPEOPLE’S REPUBLIC OF CHINA

LIU ZHONG LIMINISTER OF FINANCE